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Saturday, February 4, 2017

RETAIL MANAGEMENT SPECIAL ......Meeting millennials where they shop: Shaping the future of shopping malls

Meeting millennials where they shop: Shaping the future of shopping
malls

The traditional shopping mall is under
threat. Here is how to meet the needs of digital customers.

Digital technology is transforming global lifestyles and changing the
way we live, work, shop, eat, play, and learn. Real-estate developers therefore
must provide new ways to meet these needs.

One example is the shopping mall. These
sit at the heart of communities in many cities in both the developed and developing
worlds. But as consumers embrace digital technologies, developers must redefine
the traditional shopping mall to adapt to this behavior.

In this article, we explore five consumer
trends that will shape the future of the shopping mall.

Entertainment

Many millennials—adults born from the
early 1980s on—prioritize spending on multisensory experiences and events over
product ownership. They prefer instant gratification from entertainment and are
attracted to media, gaming, and experiences that are shared socially. Half of
millennials regularly go online for video games (versus 30 percent for
Generation X); four in ten use social media to record their experience after
using a product. Meanwhile, Gen X consumers—those born from the mid-1960s to
early 1980s—are embracing digital from a different angle. For example, this
segment increasingly views digital entertainment as an education tool,
underpinned by smart technology and an expanding, globally connected Internet.

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Meeting the needs of these groups while
responding to rapidly developing technologies, such as virtual reality and
participative experiences, will be the key to providing successful
entertainment.

This disruption in traditional
entertainment offerings has serious implications for the real-estate industry.
Here are some ways that they may react:

·Reimagining public spaces as a canvas for
entertainment. This can mean integrating the community experience into the
public realm via live social-media feeds and new display formats that share
user-generated content. Technology will enable public events and spectacles to
become participatory experiences with multisensory appeal, increasing visitor
numbers and tying the physical space with the virtual world. Being part of such
experiences and sharing them becomes a social currency for millennials, thus
encouraging repeat visits.

·Working with educators to create new
learning opportunities via “edutainment.” Likely venues include museums and
theaters, which could be redesigned to combine learning, discovery, and
entertainment. Some destination malls are already considering designing entire
districts as “hackable and playable.”

·Redesigning entertainment hubs, such as
movie theaters, theme parks, and gaming parlors as interactive experiences with
virtual-reality content and immersive experiences where the customer becomes
part of the story.

Food
and drink

“Food is the new fashion” is the mantra
that increasingly guides development. The expression reflects the idea that
food has usurped fashion as a force in retail and travel. One example is the
fast-growing trend toward healthy eating, driven by millennials’ preferences
and government policies to curb obesity. Food-focused digital platforms that
see consumers routinely reading online reviews before choosing restaurants or
ordering through food-delivery platforms are on the rise.

Quick-service restaurants are upscaling
through furniture and technology changes. At the same time, casual-dining
restaurants are transitioning to two established formats—fast casual and casual
premium. On the other hand, fine dining is embracing new and niche concepts,
such as multisensory experiences. The sector is also adapting itself to provide
more accessible dining formats.

In response, real-estate developers are
positioning more restaurants within retail areas; the idea is to create
gastronomic “stop spots” to attract shoppers. Real-estate experts suggest that
the gross leasable area devoted to food and beverage outlets in malls could
rise to some 25 percent by 2020 from 10 percent today. Among the possible
strategies are the following:

Millennial consumers want to shop for
experiences as well as products. Rising demand for cooking classes,
health-and-wellness sessions, and makeup tutorials means that retailers,
athletic-apparel makers, and electronics companies are changing what they offer
and how. Specifically, traditional department stores and shopping malls are
wondering whether and how to embrace online shopping.

The traditional department-store format is
driving less traffic to shopping malls as consumers move their retail activity
online. With online retail creating choice overload, consumers are beginning to
appreciate curated retail concepts. “Pop up” stores that provide distinctive
products for a short period are one significant response. These are on the rise
in a variety of markets. In the United Kingdom, for example, pop-ups accounted
for £2.3 billion in sales in 2015, up 12 percent compared with the previous
year.

To meet this changing environment,
real-estate developers should consider the following:

·Creating retail centers, that are also
learning zones to bring together consumers, retailers, and entertainment. One
example is a sporting-goods store that includes a fitness studio to enable the
consumer to experience the product.

·Experimenting with niche retail concepts
such as revolving storefronts, pop-up stores, dedicated space for “glocal”
brands, and offline showrooms of online players. Doing so creates a more
interesting mix of tenants. It may not maximize leasing yields per square foot,
but it will generate buzz and traffic.

·Converting anchor retail spaces into
coworking areas that are flexible and reconfigurable for other retailers and
more appealing to start-ups and to millennial customers. For example, one San
Francisco mall created a coworking space that provided direct access to more
than 20 million mall shoppers.

Getting into and out of the mall is an
important part of the shopping experience—and often a frustrating one, when it
comes to parking, safety, and convenience. Here are some approaches that
real-estate developers might consider to improve this part of the experience:

·Technology-enabled parking, including use
of robot parking valets to perform the last-mile parking service and maximize
the available parking space. Integrating parking apps and sensors can help
shoppers spot spaces and then get to them.

By 2017, the millennial generation will
comprise the largest online audience, and they will have more buying power than
any generation ever. Almost seven in ten say they are influenced by friends’
social-media posts; 83 percent say they trust recommendations by friends and
family. They rely on peer recommendations, and increasingly discover products
online before going out to shop. But they still want to touch, feel, and
explore products before purchasing them. The need, then, is to create a
seamless chain between online and on-site shopping. There are several
technology-enabled innovations to consider:

·Creating “virtu-real” formats to provide
consumers with a more interactive retail experience, for example, through the
use of touchscreen navigation panels, virtual fitting rooms, magic mirrors, and
augmented-reality zones.

·Merging online and offline retail using
“social shopping” technology with digital screens in transport-arrival zones,
piazzas, shop windows, and major junctions of the shopping district. These can
help consumers find products, access reviews, and then direct them where to
buy.

·Using smartphones for e-checkouts and
click-and-collect services, to help blend the offline and online shopping experience.
Some of the largest mall operators in the United States are already working
with partners to give shoppers same-day delivery service.

Digital technologies and changing shopping habits are a
clear threat to traditional retail business models. But there are positive ways
to respond to these trends. To embrace these opportunities, real-estate
developers must get closer to consumers and figure out how to meet their
evolving wants and needs. That means rethinking the role of the shopping mall,
and adapting its strengths to those of the virtual world.